Dy. Director Of Income Tax vs Nagorao Malku Ghadge & Ors on 15 October, 2009

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           IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                CRIMINAL APPELLATE JURISDICTION




                                                                             
            CRIMINAL WRIT PETITION NO. 1216                     OF 2008




                                                     
    Dy. Director of Income Tax
    (Investigation) Unit No. V(1)                                      ..Petitioner




                                                    
          versus

    Nagorao Malku Ghadge & Ors.                                      ..Respondents




                                            
                           
    Ms. Anamika Malhotra for Petitioner.
    Mr. Nitin Pradhan with Mr. Sayaji Nangre, Mr. Ranjeet M. Pawar, Mr.
                          
    Sameer Nangre and Mr. Suraj Nangre for Respondent No. 1
    Mrs. R. V. Newton - APP for State.
           


                                       CORAM: S. A. BOBDE, J.

DATED : OCTOBER 14 & 15, 2009.

ORAL ORDER :

1. The petitioner has challenged the Order dated 19th November, 2004 of

the Additional Chief Metropolitan Magistrate, 19th Court, Esplanade,

Mumbai, confirmed in Revision by the Sessions Court Greater Mumbai by

an Order dated 5th April 2008 rejecting the prayer of the Deputy Director of

Income Tax – the petitioner herein, for return of an amount seized from the

custody of the respondent No. 1 Nagorao Malku Ghadge under Section 124

of The Bombay Police Act, 1951.

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2. The relevant facts of the matter begin with the seizure of an amount

of Rs.80,57,680/- and jewellery worth Rs.2,18,920/- from the possession of

the respondent No.1 Nagorao on 21st May 2001 in the course of a search

of his house by the DCB CID i.e. State Police. Nagorao was prosecuted

under Section 124 of The Bombay Police Act and called upon to account

for possession of the cash and the jewellery. He gave a satisfactory

explanation to the Magistrate in accordance with the provisions of law.

Accordingly he was acquitted on 7th May 2004 under that Act. Since Section

124 entails punishment only if such a person fails to account for such

possession. Section 124 of The Bombay Police Act reads as follows:

“124. Possession of property of which no satisfactory

account can be given.- Whoever has in his possession

or conveys in any manner, or offers for sale or pawn,
anything which there is reason to believe is stolen

property or property fraudulently obtained, shall, if he
failed to account for such possession or to act to the
satisfaction of the Magistrate, on conviction, be
punished with imprisonment for a term [which may

extend to one year but shall not, except for reasons to be
recorded in writing, be less than one month and shall
also be liable to fine which may extend to [five thousand
rupees].”

3. During the pendency of the trial, the Income Tax Department which

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had received information from the Police issued Warrant of Authorisation on

22nd May 2001 under Section 132-A of the Income Tax Act authorising four

of its officers to require the Senior Police Inspector Unit -5 Crime Branch,

CID to deliver the aforesaid assets, books of accounts, etc. to such

authorised officers. Apparently, the authorisation could not be given effect

to against the Sr. Police Inspector, Unit – 5, Crime Branch, CID, who was

required to deliver the said assets to the authorised officer since the assets

had passed into the custody of the court and the court had deposited the

jewellery and the amount in Fixed Deposit in State Bank of India, where

they are lying even at this moment.

4. During the trial one of the authorised officer Deputy Director of

Income Tax moved an application for return of the seized cash and jewellery

along with relevant records of the case for the purposes of assessment under

Section 451 of the Criminal Procedure Code. That application was rejected

by the Court for want of details and because the Department had not come

to the conclusion that the property is unaccounted or undisclosed. The

application was thus dismissed as a premature application. The Sessions

Court confirmed that order and granted liberty to the authorised officer to

make a fresh application along with other relevant record.

5. Accordingly, another application was made on 1st August 2002 for

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the purpose along with a fresh authorisation again requiring the Senior

Police Inspector, Unit – 5 Crime Branch, CID, to deliver the assets, books

of account etc. to the authorised officer by the Income Tax Department.

However, the trial came to an end and the respondent No.1 Nagorao was

acquitted on 7th May 2004.

6. The application under Section 451 of the Cr.P.C. was pressed on

behalf of the petitioner as an application under Section 452 of the Criminal

Procedure Code which the trial court rejected. The rejection has been

confirmed by the Sessions Court in Appeal. Those orders are challenged in

this writ petition.

7. Ms. Malhotra, the learned counsel for the petitioner submitted that the

Sessions Court committed a serious error of law in rejecting the application

merely on the ground that the authorisation under Section 132-A of the

Income Tax Act can only require an officer and authority who has taken the

assets or books of accounts or other documents into custody to return the

same and since a court cannot be treated as such an officer or authority, the

petitioner’s application was thus liable to be rejected.

8. Mr. Pradhan the learned counsel for the respondent No. 1 submitted

that indeed the court is not an officer or authority contemplated by section

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132A of the Income Tax Act which can be required to return the seized

assets, in this case the cash and jewellery to the Income Tax Department. It

was further submitted by Mr. Pradhan that there was no power in a Criminal

Court by virtue of Section 452 of the Cr.P.C. to direct return of a property

which was seized in respect of offence under Section 124 of The Bombay

Police Act. Since in the present case the respondent No.1 gave a satisfactory

explanation as a result of which he was acquitted. Section 132A of the

Income Tax Act reads as follows:-

“132A. (1) Where the [Director General or Director] or the [Chief

Commissioner or Commissioner]’ in consequence of information
in his possession, has reason to believe that-

(a) any person to whom a summons under sub-section (1)
of section 37 of the Indian Income-tax Act, 1922 (11 of

1922), or under sub-section (1) of section 131 of this Act,
or a notice under sub-section (4) of section 22 of the Indian
Income-tax Act, 1922, or under sub-section (1) of section

142 of this Act was issued to produce, or cause to be
produced, any books of account or other documents has
omitted or failed to produce, or cause to be produced, such
books of account or other documents, as required by such

summons or notice and the said books of account or other
documents have been taken into custody by any officer or
authority under any other law for the time being in force,
or

(b) any books of account or other documents will be useful
for or relevant to, any proceeding under the Indian Income-

tax Act, 1922 (11 of 1922), or under this Act and any

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person to whom a summons or notice as aforesaid has been
or might be issued will not, or would not, produce or cause

to be produced, such books of account or other documents
on the return of such books of account or other documents

by any officer or authority by whom or which such books
of account or other documents have been taken into
custody under any other law for the time being in force, or

(c) any assets represent either wholly or partly income or
property which has not been, or would not have been,
disclosed for the purpose of the Indian Income-tax Act,

1922 (11 of 1922), or this Act by any person from whose
possession or control such assets have been taken into

custody by any officer or authority under any other law for
the time being in force,

then, the Director General or Director or the Chief Commissioner
or Commissioner may authorise any Additional Director,

Additional Commissioner, Joint Director, Joint Commissioner,
Assistant Director or Deputy Director, Assistant Commissioner or

Deputy Commissioner or Income-tax Officer (hereafter in this
section and in sub-section(2) of section 278D referred to as the
requisitioning officer) to require the officer or authority referred to

in clause(a) or clause (b) or clause(c), as the case may be, to
deliver such books of account, other documents or assets to the
requisitioning officer.

(2) On a requisition being made under sub-section (1), the officer
or authority referred to in clause (a) or clause (b) or clause(c), as
the case may be, of that sub-section shall deliver the books of
account, other documents or assets to the requisitioning officer
either forthwith or when such officer or authority is of the opinion
that it is no longer necessary to retain the same in his or its
custody.

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(3) Where any books of account, other documents or assets have
been delivered to the requisitioning officer, the provisions of sub-

section (4A) to (14) (both inclusive) of section 132 and section
132B shall, so far as may be, apply as if such books of account,

other documents or assets had been seized under sub-section (1) of
section 132 by the requisitioning officer from the custody of the
person referred to in clause (a) or clause (b) or clause (c), as the

case may be, of sub-section (1) of this section and as if for the
words “the authorised officer” occurring in any of the aforesaid
sub-section (4A) to (14), the words “the requisitioning officer”
were substituted.]

9.

This provision empowers the Director General or Director or the

Chief Commissioner or Commissioner or Commissioner of Income Tax to

authorise any of the officers specified in said Section such as Joint Director,

Joint Commissioner etc. known as requisitioning officers to require an

officer or an authority referred to in clauses (a) (b) or (c) in possession of

such assets, books of accounts or documents to deliver such books of

accounts, documents or assets to the requisitioning officer. There is no doubt

that the term ‘officer’ or ‘authority’ in possession of such seized assets,

books of accounts or documents will not include a court. The term

requisition means an ‘authoritative formal demand’ vide Black’s Law

Dictionary 8th Edn. and its use shows an intention to conclude a case of law.

Surely it is not the intention of the Income Tax Act under Section 132A to

authorise its officers to require a court to deliver the property which is

custodia legis to its officers. This position is also settled by a decision of the

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Andhra Pradesh High Court.

10. In Sadruddin Javeri vs. Government of Andhra Pradesh & Ors.

[1994 (104) Taxman 335 (AP)], a Division Bench of the Andhra Pradesh

High Court observed as follows:

“Held

The police officer who seized the property, has a duty to
transport the same to the Court or to give custody thereof

to any person on his executing a bond and undertaking to

produce the property before the Court as and when
required and to give effect to the further orders of the
Court as to the disposal of the same. There can be no

transfer or appropriation of any property seized by the
police except under the order of the Court. The counsel

for the ITOs has conceded that s. 132A does not authorise
any notice to the Court as by no stretch of imagination the

Court can be identified as any officer or authority under
any other law for the time being in force as contemplated
under cl. (c) of s. 132A(1), r/w. cl.(a) thereof. There has

been gross violation of law by the entry of the ITOs to
take delivery of the properties from the police before the
seizure is reported to the Court and the Court passed any
order as to its custody. Property seized from the house of
the petitioner ordered to be released immediately.”

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I am in respectful agreement with the view of the Division Bench of the

Andhra Pradesh High Court. Ms. Malhotra the learned counsel for the

petitioner however submitted that though the term ‘Officer’ or ‘Authority’

under Section 132A did not include the court the authorised officers were

empowered by virtue of the authorisation under that section to make an

application for return of the property under Sections 451 and 452 of the

Cr.P.C. as the case may be. It is however not possible to accept this

argument since there is nothing in Section 132A under which an authorised

officer may be empowered to recover any property from a court. The

purpose of enactment of Section 132A is clear, namely, to enable the

Director General or Director or Chief Commissioner or a Commissioner of

the Income Tax Department for requiring any “officer or authority” who

has taken any assets, books of accounts etc. into his custody and requiring

such officer or authority to deliver such assets, documents or books of

account to the requisitioning officer. The purpose of the section is not to

authorise any officer to make an application to a court for return of any

property. The purpose of the provision cannot be stretched to make an

application to the court which is routinely done by the department without

resorting to any particular provision of the Income Tax Act.

11. The learned counsel for the petitioner however relied on a decision of

the Madras High Court in Babu Rao vs. Inspector of Police & Anr. [190

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ITR 616] where an amount seized was handed over to the court and an

Income Tax Department filed an application for return of the property under

Section 451 of the Cr.P.C under an authority under Section 132 and 132A of

the Income Tax Act.. The learned Single Judge who decided the matter held

that it is not necessary to decide whether the word ‘authority’ used in

Section 132A of the Act includes the court since the order has been passed

by the Metropolitan Magistrate under Section 451 of the Cr.P.C. read with

Sections 132 and 132A of the Act on a request emerging from the Income

Tax Department. The court merely held a criminal court is entitled to pass

such an order for return of property under Section 451 of the Cr.P.C. where

such property seized and produced before it to the person entitled to

possession of the property seized. In my view, that decision is not an

authority for the proposition that an authorisation under Section 132A

empowers an authorised officer to make an application to a criminal court

for return of property which is in custodia legis. Though it seems that in that

case the Income Tax Authorities did make an application on the basis of an

authorisation under Section 132-A of the Income Tax Act.

12. The learned counsel for the petitioner also relied upon a decision of

the Allahabad High Court in Union of India vs. Judicial Magistrate

(Eastern Railway), Mughalsarai & Anr. [140 ITR 553] for the

proposition that by virtue of authorisation under Section 132A authorised

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officer can recover the property from a court. However, the facts of the case

were entirely different and so in the ratio. The assets in that case were seized

by the Station House Officer who refused to deliver possession of the assets

without an order of the Court. The High Court held that the Magistrate

should have directed the Station House Officer to release the assets to the

requisitioning officer instead of the party from whom they were seized.

That decision also is of no help to the case of the petitioner.

13.

Turning to the facts of the present case, it appears that after the

property was seized, the petitioner – the Income Tax Department assessed

the tax liability of the respondent No.1 in respect of the seized amount. Not

only that after such assessment, they have made an application to the court

under Section 226(4) of the Income Tax Act which reads as follows :

“226. (4) The [Assessing] Officer [or Tax Recovery
Officer] may apply to the court in whose custody there
is money belonging to the assessee for payment to him
of the entire amount of such money, or, if it is more than

the tax due, an amount sufficient to discharge the tax.”

The petitioner seems to have already resorted to the correct procedure for

recovering the tax amount which is in custodia legis since that provision

empowers the department to recover the entire amount if the amount is less

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than that is seized if such amount is less than the tax liability or such an

amount is sufficient to discharge the tax liability. It hardly needs any

emphasis that the Income Tax authorities are not entitled to the amount

except by way of a tax. This application under Section 226(4) is in

accordance with the observations of the Supreme Court in K. Choyi vs.

Syed Abdulla Bafakky Thangal & Ors. [AIR 1980 SC 99], where Their

Lordships observed as follows:

“….If an assessment is completed before the seizure is

effected and while the assets are still in the custody of the
Court, the appropriate remedy for the Revenue is to make
an application under Section 226(4) of the Income Tax

Act.”

The said application is pending before the criminal court. In such

circumstances, it would be appropriate in the interest of justice to direct the

criminal court to decide an application under Section 226(4) of the Income

Tax Act preferred by the Department on 4th June 2008 as expeditiously as

possible in accordance with law. Having regard to the fact that the amount

is lying in the custody of the court for over a period of 5 years after the

respondent No. 1 was acquitted, the trial court is directed to decide the said

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application not later than three months from the date the parties appear

before it. Parties are directed to appear before the trial court on 9th

November 2009. Petition is disposed of accordingly.

(S. A. BOBDE, J.)

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